annual report 2007 · 3. we will promote corporate social responsibility (csr). we will cultivate...

PROFILE

CONTENTS

Ever since its founding in 1897, Meidensha Corporation has been working

on the relentless pursuit of new technology and product developments and

witnessed steady growth. Our product offerings cover a wide area, such as

generators, substation equipment, electronic equipment and information

equipment. Our mission is not only to provide these products but also to

recommend the best solutions on the basis of what a customer values best. In

order to realize these best solutions, we engage in the supply of various

products and provide related services such as engineering, facility management

(including operation and maintenance), repair and product-life support.

FINANCIAL HIGHLIGHTS 3

MESSAGE FROM MANAGEMENT 4

TOPICS 6

OPERATING PERFORMANCE HIGHLIGHTS 8

OVERSEAS OPERATIONS 10

R & D HIGHLIGHTS 11

ENVIRONMENTAL PERFORMANCE 12

FINANCIAL SECTION 13

OVERSEAS AFFILIATES 36

CORPORATE DATA 39

BOARD OF DIRECTORS 39

3Annual Report 2007

FINANCIAL HIGHLIGHTS

Millions of yen Thousands of U.S. dollars2007 2006 2005 2007

Net Sales ¥194,194 ¥183,747 ¥185,442 $1,645,712

Net Income 2,314 3,252 5,113 19,610

Net Income Per Share (yen, U.S. dollars) 10.18 14.12 22.33 0.09

Cash Dividends Paid 1,137 909 682 9,635

Total Assets 223,386 201,274 180,595 1,893,102

Number of Employees 6,775 6,561 6,662 —

The consolidated figures in this Annual Report are expressed in yen and solely for the convenience of the

reader, translated into United States dollars at the rate of ¥118 = U.S.$1, the approximate exchange rate prevailing

on the Tokyo Foreign Exchange Market as of March 31, 2007. See Note 1 to Consolidated Financial Statements.

04 05 06 07

194,163

180,595

201,274

223,386

0

50,000

100,000

150,000

200,000

250,000

04 05 06 07

181,560 185,442 183,747194,194

0

50,000

100,000

150,000

200,000

250,000

0

5,000

10,000

04 05 06 07

2,335

5,113

3,252

2,314

Net Sales (¥ millions) Net Income (¥ millions) Total Assets (¥ millions)

Years ended March 31

4 Annual Report 2007

We, at Meidensha Corporation (“Meiden”) and its consolidated

subsidiary companies (collectively the “Meiden Group” or “the

Company”), share a common philosophy: “Constantly in pursuit

of ‘Innovation for New Technologies’ and in Contributing to the

Well-being of the Society at Large.” We aim to do this by drawing

on the engineering resources of over a century of its history and

to become an excellent company fit for the Twenty-first Century.

Our basic principles are: (1) to provide the best product

experiences to customers through new and innovative technologies

of the highest quality, (2) to highly value the shareholder’s interests,

(3) to focus on profitability and (4) to utilize resources for the

benefit of society. Our Group’s core strategy is to drive business

growth as an engineering company. The Meiden Group product

portfolio includes a wide spectrum of offerings: generators,

substation equipment, electronic equipment, and information and

communications products. We not only offer such products, but

also provide optimum customer-driven solutions using such

products for the benefit of the customers. Our solutions business

in Japan includes services such as engineering, operation,

maintenance and management of facilities, which contributes to

the enhancement of the asset values of our customers.

During fiscal 2006, the Japanese economy showed solid

continuous growth due to business capital investment and personal

consumption and economic growth against the background of

corporate profitability increase and job situation improvement.

In the Heavy Electrical Industry Market in Japan, the market

suffered a further decline in demand and a lowering of market prices

due to several factors, including a curb in public sector capital

investment. The Company faced a very challenging market situation.

Under these economic circumstances, the Company made

vigorous across-the-board efforts to boost sales. Sales for fiscal

2006 totaled 194,193 million yen (consolidated basis); 5.79% up

from the previous fiscal year.

We made efforts across-the-board to cut expenses, reduce

costs, and improve productivity. As a result, net income before taxes

and adjustments came to 4,934 million yen (consolidated basis),

and net income for the year came to 2,313 million yen

(consolidated basis).

A year-end dividend of 5 yen per share was declared. This was

an increase of 1 yen per share from the previous fiscal year.

Under these conditions, the Meiden Group is working to

increase sales and profitability. The Meiden Group has adopted a

corporate focus as an “engineering and service company.” We have

developed power, transmission and distribution technologies and

drive application technology from the experiences gained through

individual product sales. By combining these technologies with

next generation technologies, we are now providing solutions for

optimized product life cycles in the area of social infrastructure

for the environment, energy and disaster prevention and for such

solutions in private industries and overseas markets. At the same

time, we are optimizing the systems and services that cater to the

individual needs of the customers.

We intend to capitalize on the new business opportunities

brought by the renewed interest in new energy caused by the

recent oil price hikes. We are putting our management resources

into new business and product development. One example is

that we built a new Electric Double Layer Capacitor (EDLC)

factory at Meiden Numazu Works, Numazu City, Shizuoka

Prefecture, in March 2006. We are enhancing the factory to

produce a large volume of EDLC and are working hard to develop

various EDLC applications. Another is our alliance with Siemens

Power Generation Corporation (SPGC), a company based in

Orlando, Florida, U.S. We are developing a Solid Oxide Fuel Cell

(SOFC) system using the SPGC SOFC unit for the Japanese

Market, which could see a market release of the SOFC system in

a few years.

In order to meet business demand for our products in overseas

markets, we are increasing our sales and production bases. Another

example is the electric motor production plant that we built in

Hangzhou, China, which began production in November 2006, as

a measure for reinforcing our motor and drive business. For the

North American auto market, we established a new company in

the Greater Detroit Area, Michigan. This company will engage in

the contract research service for car and component development

and we are aiming for service commencement in January 2008.

To improve productivity through cost reductions and business

process streamlining, we intend to promote and strengthen existing

alliances, such as our joint ventures with Hitachi, Ltd., and Fuji

Electric Systems Co., Ltd., and with ABB Ltd. of Switzerland. In

April 2006, as a realignment of our motor business, we established

a new motor business company jointly with our sister company.

This company is called Kofu Meidensha Electric Mfg. Co., Ltd., a

company registered in Chuo City, Yamanashi Prefecture. Through

these activities, we are working hard to improve profitability.

To meet these challenges, the Meiden Group has formulated a

new medium-term management plan for the three-year period

from fiscal 2006 to 2008, known as the “Value Up Plan.” The entire

Group embarked on the plan on April 1, 2006. This “Value-up Plan”

means increase the value on three (3) fronts: Technology, Human

Resources and Business Value. The Meiden Group aims to become

Message from Management

5Annual Report 2007

a company with an excellent corporate reputation and to maximize

corporate value by securing high levels of profit. The Group will

implement the various policies discussed below.

“Value Up Plan”

a. Basic Policy1. We will promote technology-driven management in a

cross-functional manner among Sales, Engineering and R & D. We

would like to make strong businesses and products stronger. We

will develop and promote new products.

2. Our objective is to free all management resources from

existing non-core businesses and to invest in our core and strategic

businesses, such as new business development, overseas market

business, engineering & service business, etc.

3. We will promote corporate social responsibility (CSR). We

will cultivate personnel with high social contribution and eco-

consciousness. We will strengthen corporate governance.

b. Key Action Plan:(1) Promote Technology-driven Management

We will put human and financial resources into R & D. We

will develop solid technical bases by reinforcing our R & D

organization, intellectual property strategy and human resources

development. These reinforcement actions will be done in line

with our marketing strategy. We intend to produce high value-

added products.

(2) Develop New Businesses

The Meiden Group will work on the development of new

businesses relating to our core business of Meiden Group. We will

reinforce our ability to find the new business possibility and our

support to the business incubation. These actions will lead to the

efficient creation and fostering of new businesses.

(3) Strengthen Overseas Market Businesses

We will reinforce efforts to develop new products for the

overseas market, and improve overseas production, after-sales

service, and maintenance service offerings, and promote human

resources development for overseas market business operations.

In doing so, we would like to increase revenues from overseas

and make our overseas market business operations a key pillar

of our business.

(4) Promote CSR-based Management

We will review the Group’s business activities in light of

compliance (with laws, rules and regulations), environmental

conservation, labor safety and health, customer satisfaction (CS),

quality control, etc. We will improve Group-wide CSR initiative and

promote CSR activities as an integral part of corporate strategy.

(5) Strengthen Group Strategy

Each Meiden Group company will promote its organization to

efficiently promote synergy among Meiden Group’s businesses and

thereby maximize the overall corporate value of the Meiden Group.

We will define the inherent challenge that each Meiden Group

company has in terms of (1) the synergy level among Meiden

Group’s businesses and (2) the profitability level. We will implement

policies, including the reform and consolidation of the Group

business, to realize the efficient management of all Meiden Group

companies.

c. Earnings Targets

By firmly executing the Key Action Plan of the Value Up Plan,

the Meiden Group will be able to address to the management

climate changes in a flexible and fast manner and aims to establish

a solid presence in the various markets. We ask every shareholder,

as well as our customers and business partners, to give us your

continued guidance and support.

Fiscal 2008 Non-Consolidated

173,000 million yen

7,000 million yen

4.0%

7,000 million yen

4,500 million yen

Sales

Operating Income

Ratio of CurrentProfits to Sales

Current Profits

Net Income

Fiscal 2008 Consolidated

210,000 million yen

11,500 million yen

4.8%

10,000 million yen

6,000 million yen

Keiji Kataoka, President


The Company is realizing a zone development project called

“ThinkPark” in the West Exit area of JR Osaki Station in

Shinagawa City, Tokyo. The main building is a 30-story business

and commercial building that has another two stories

underground. The other is a 15-story building that will hold a

business hotel and fitness club. Both buildings are in the final

stage of construction work and will be completed in late

summer of 2007. The official opening of “ThinkPark” is

scheduled for October 2007. “ThinkPark” is a business complex

with due design consideration given to the best technology and

the future needs of our tenants.

ThinkPark Tower, ThinkPark Plaza,

and “Osaki Forest”This development is a joint project by Meidensha Corporation

and World Trade Center Building, Inc., a Tokyo-based company.

ThinkPark Tower is a 30-story office building in the

prestigious location of the upper Yamanote district in Tokyo,

with advanced zone development made possible under a zoning

permit for large-scale urban development areas. The 1st and

2nd floors will comprise ThinkPark Plaza, with shops and

restaurants buzzing with the excitement found in a busy

metropolitan downtown area.

Osaki Forest, which is a spacious open zone inside the

ThinkPark Zone, is a public space where people can gather for casual

conversation, social exchanges, relaxation, exercise, and so on.

Hotel and Fitness ClubThinkPark also has a full-scale business hotel and fitness club.

The hotel is a highly reputed business hotel of a Daiwa Roynet

Hotels chain, which is famous for its comfort and quality.

It will have approximately 200 guest rooms.

The fitness club will be operated by Nippon Athletic Service

(NAS). The facility will be fully equipped, with a 25 m pool, a

gym, and a studio, taking up a space of approximately 3,000 m2.

With a wide range of activities to offer, this will be a full-fledged

fitness and relaxation club.

ThinkPark to open in October 2007.

For details, please visit the ThinkPark Web site:

http://www.thinkpark.jp

TOPIC 1

Osaki Area Development: The ThinkPark Project

7Annual Report 2007

* Hosui Elementary School has a distinguished history. It was established in 1918, financed solely by Mrs. Take Shigemune, the Company’s second president and the

wife of the Company’s founder (Mr. Hosui Shigemune). She personally donated the school to Shinagawa City to fulfill the wishes of her husband.

As an expression of appreciation for the local community, we will hold “Meet the Music Sessions” and“Handicraft Sessions.”

This year marks the 110th year of our Company. As an

expression of special thanks to the local community that supported

our Company, we plan to hold a number of special memorial events.

Beginning with Hosui Elementary School, which has a special

historical relation with the Company, we will hold several “Meet the

Music Sessions” and “Handicraft Sessions” for elementary and junior

high schools in Shinagawa City, Tokyo, from April to November 2007,

in close cooperation with the Shinagawa City Board of Education.

Our relationship with Shinagawa City, TokyoOsaki, in Shinagawa City, Tokyo, is a place associated with

the Company’s history, from its founding to the present.

The Company was founded by Mr. Shigemune Hosui in 1897.

In 1913, the Company opened its Osaki factory. Until the end of

the 1980s, Osaki served as a production base for generators,

motors, transformers, and our other core products.

The Company subsequently built new plants in Numazu City in

Shizuoka Prefecture, in Ohta City in Gunma Prefecture, and in other

locations, to keep up with vigorous demand. Osaki’s presence as a

production base was weakened. In 1993, however, the Meiden R&D

Center was completed there, and this autumn, ThinkPark will be born

there as a business complex, incorporating the latest technology and

taking into account the future needs of our tenants. At the same time,

Osaki will once again become the real head office of the Company.

Meiden “Meet the Music Session”The students will experience live performances by

professionals, allowing them to learn the joys of music.

We asked the Tokyo Metropolitan Symphony Orchestra to

perform.

One of the following music groups will visit the schools: String

Quartet, Brass Quintet, or Woodwind Quintet.

Meiden “Handicraft Sessions”The main objectives are: to provide the kids with hands-on

experience in making products themselves and allow them to

experience the fun of handicrafts work.

With the cooperation of CoreNet (Co-Operation Program of

Retired Executives Network), which is a non-profit organization,

the children will make a motor-based small vehicle using the

Scroller handicraft kit.

Aside from Shinagawa City, the Company will hold other

memorial events in other communities with key production units.

These are: Ohta City, in Gunma Prefecture, Numazu City in

Shizuoka Prefecture, Kiyosu City in Aichi Prefecture, and Chuo

City in Yamanashi Prefecture. We plan to organize memorial

events, including concerts, and support local cultural activities

to express our special thanks to the people in each community.

TOPIC 2

Memorial Events for the110th Anniversary


OPERATING PERFORMANCE HIGHLIGHTS

In the Power, Railways & Private Sector Business Segment, we continued efforts to

increase the sales of Electric Double Layer Capacitor (EDLC) applied products. The current

EDLC production capacity at the factory is 15,000 units per year. As an EDLC-applied

product, we received our first order for our regenerative power storage system in fiscal

year 2006. In the Wind Power Business, we completed a total 25.5 MW wind farm project,

the Hachiryu Wind Farm in Akita Prefecture, and started commercial operation,

supplying power to Tohoku Electric Power Co., Inc. from October 2006.

In the Environmental Engineering Segment, we continued efforts to increase

orders for water treatment facility renovation projects. We also promoted the business

growth of operation and maintenance services business for water processing facilities.

In addition to our conventional business of facility management outsourcing services,

we received an order for broad business process outsourcing (“BPO”) service from

the local government water utilities by forming a joint venture with other partners

for an advanced BPO business.

In the International Business Segment, we continued efforts to enhance the

overseas production units to improve production capacity and service quality. During

fiscal year 2006, we completed a new transformer factory at Meiden Singapore Pte.

Ltd. to produce 100 MVA class transformers, and started commercial operation.

Social Infrastructure Systems Business Sector

Industrial Systems Business Sector

In the Information and Communication Business Segment, we continued efforts

to drive the sales of industrial computer and controller, vacuum capacitors and

pulse power generators, etc. which are our key products in this business segment.

During fiscal year 2006, we achieved a growth in orders for these products due to

the steady growth of the semiconductor manufacturing machinery industry.

In the Motor Drive Application Business Segment, we achieved good order

growth of motor drive systems for electric forklifts due to increased interest in its

eco-friendly feature. In order to meet demand, we established a new company called

Electric Double Layer Capacitor

Hachiryu Wind Farm

Meiden Singapore BPO service

Industrial controller

9Annual Report 2007

Engineering System Business Sector

Other Business Sectors

In the Maintenance Service and Facility Management Service Segment, we

continued efforts to drive the growth of the service business to meet the need for

energy savings demand caused by the rising eco-consciousness of our customers.

We reinforced servicing capability to meet the growth of demand for maintenance

service due to the solid growth of service demand in the Japanese Market and due to

the economic growth of the East Asian Region. We achieved order growth by

outsourcing service of maintenance work; by extending facility product life through

lifecycle engineering; and by diagnostic service of facilities in the environmental

engineering sector, etc. The maintenance and repair service for wind power facilities

became our new key service offering.

In the area of Maintenance Service for semiconductor manufacturing equipment,

we increased the scope of service for servicing items, we continued efforts to develop

the business process outsourcing service for the maintenance work of the total

semiconductor production line of the device manufacturing companies, etc.

We aim to drive the growth of the service business.

Other Meiden Group businesses and companies include the marketing companies, which cover a vast array of business areas, the welfare

program service for Meiden Group associates, and business process outsourcing service on accounting work. Orders and revenue remained

steady for all these business sectors.

Kofu Meidensha Electric Mfg. Co., Ltd., registered in Chuo City, Yamanashi Prefecture,

in April 2006 by merging with our subsidiary company as a part of our consolidation

program for the motor drive business unit. We also constructed a motor

manufacturing factory in Hangzhou City, China, as Meiden Hangzhou Drive Systems

Co., Ltd. The factory commenced production in November 2006.

In the Dynamometer System Business Segment, we achieved order and revenue

growth due to the active R & D spending of the auto industry.

Vacuum capacitors

Hangzhou factory Dynamometer system

Rotary machine insulation diagnostic van

Semiconductor

OVERSEAS OPERATIONS


During fiscal year 2006, the global economy achieved

solid economic growth, led by surging Chinese and Indian

economies and the growth of industrial and emerging-

market countries. In the United States, the growth rate

slowed to around the 2% level due to a weakness in the

housing sector and the volatility of oil prices. China’s

economy grew, driven by a growth in exports, at the rate of

more than 9%.

The East Asian economy, which is Meidensha

Corporation’s major market, posted a growth of around 6%

in fiscal 2006. Singapore in particular showed a strong

performance of around 7%, despite the negative impact of

the rise in world oil prices.

In the US power sector, there was a 4.6% increase in total

net power generation due to an increase in coal-fired plants,

nuclear power and wind power.

In the automotive market in the US, which has a large

impact on our dynamometer systems sales, the industry

showed a sales decline in pickup trucks, sport-utility vehicles

and minivans, which was influenced by a shift in buyer

preference toward smaller, more fuel-efficient vehicles. US

auto sales in fiscal year 2006 totaled 16.3 million vehicles.

The major products ordered in fiscal year 2006 were as

follows:

In the field of substations, we received orders for

substations for Rabigh Refining & Petrochemical Company,

which is a joint venture between Saudi Arabian Oil Co.

(“Saudi Aramco”) and Sumitomo Chemical Co., Ltd., for the

development of an integrated refinery and petrochemicals

complex in Saudi Arabia. We also received orders for mobile

substations for the Middle East.

In the field of electric railroad substations, we received

an order for a traction substation for Dubai Municipality

Headquarters, U.A.E.

In the power generation field, we received an order for a

10 MW biomass power generation plant (using waste

coconut shells as a resource) for the Seguntor Bioenergy

Power Plant Project in Malaysia and for a 10 MW biomass

power generation plant (using empty fruit bunches (EFB)

as a resource) for the Kina Biopower Power Plant Project in

Malaysia. We also received orders for diesel generating

systems for the Middle East.

In the Asia-Pacific automotive market (outside Japan),

an Asian automaker placed orders for transmission testers.

We also received orders for test systems for a Japanese

automaker’s technical center and its factory in Asia.

The Major products manufactured and shipped during

fiscal year 2006 were as follows:

In the field of electric railroad substations, we shipped

and installed traction substations for the Dubai Metro

Project, U.A.E.

In the dynamometer field in North America, we supplied

and installed several test systems for engine transmissions

and engine benches for several Japanese automakers’

factories.

In the Asia-Pacific automotive market (outside Japan),

we supplied and installed a transmission tester to Seoul

National University. We also shipped and supplied test

systems for one Japanese and several Asian automakers for

their technical centers and factories in Asia.

In the field of power generation, we shipped and

installed a 9.9 MW biomass power generation plant (using

rice husks as a resource) for the Surat Thani Green Energy

Co., Ltd., in Thailand.

Other noteworthy events in our overseas operations

included a celebration of our anniversary year and

ceremonial parties for Thai Meidensha Co., Ltd. (40th

anniversary ceremony in Bangkok in August 2006) and P.T.

Meiden Engineering Indonesia (15th anniversary ceremony

in Jakarta in December 2006.) These events were attended

by representatives from key accounts, partners, their

associates and Meiden Group Company representatives.

There were new factory opening ceremonies for Meiden

Singapore Pte. Ltd. in September 2006 (for a new 100 MW

class transformer factory) and for Meiden Hangzhou Drive

Systems Co., Ltd. in Hangzhou City, China, in November 2006

(for a new motor manufacturing factory.)

11Annual Report 2007

Social Infrastructure Systems Business Sector

We are constantly enhancing the technologies used in our high-quality power supply products to meet the needs of our customers.

We have developed an Electric Double Layer Capacitor (EDLC) applied power network stabilizing system and a 10 MW Class large

capacity dynamic voltage compensator. In fiscal year 2006, we made a number of innovations and advances in Microgrid-related

technologies. The Microgrid System can stabilize the power supply in a given Microgrid. This system can effectively utilize the power

generated by several different energy sources. Our innovations include: programs to optimize power source facility planning and

operation modes and to develop the Microgrid control system to realize islanding operation within the Microgrid power network.

We have developed the world’s first 72kV-class vacuum circuit breaker to be free of SF6 gas. SF6 gas is considered a greenhouse gas.

Water quality control in water processing is our core technology. On top of that, we added technologies relating to operation,

facility maintenance, design and engineering. Drawing on these engineering resources, we developed a solutions business for

the water utilities segment.

We are constantly developing technologies for membrane-based water treatment systems for water supply and sewage

plants and technologies for advanced processing for removal of nitrogen and phosphorus from sewage water.

Industrial Systems Business Sector

With good sales, we are constantly improving the pulse power generator and vacuum condenser for the semiconductor

manufacturing industry in terms of its performance and reliability.

We are also enhancing our product portfolio: (1) for application software to smoothly operate the semiconductor

manufacturing system and (2) for an industrial controller to be pre-installed in the semiconductor manufacturing system. We

are aiming to drive sales growth.

We are focusing innovations on the development of a highly efficient, energy-saving compact permanent magnet synchronous

motor. Combining this motor with the inverter, we are developing variable speed systems for elevator and forklift applications.

We are constantly developing our various dynamometer-based testing systems for the auto industry, for applied technology

development or other application needs. Our efforts at innovation include: development of an engine bench to simulate a real-

life exhaust piping layout (whose simulation-based layout evaluation was difficult using conventional technology) and the

development of a drivetrain bench using an engine-simulating motor that can duplicate engine-like performance behavior.

We are constantly developing our diagnostic technology so that we can understand and detect the deterioration condition of

electrical facilities while power is being supplied. Our development is addressing the need to reduce facility management costs for

electrical systems and extend product life. With these innovations, we are enhancing our (product) lifecycle engineering service.

R & D HIGHLIGHTS

Energy Business Segment

Environmental Engineering Business Segment

Information and Communications Business Segment

Motor Drive Application Business Segment

Dynamometer Systems Business Segment

Engineering System Business Sector


• Waste Water1,235 kt

• BOD 5,731 kg

Discharge into Public Waters

• CO2 30,440 t-CO2

• VOC 85 t

• SF6 617 kg

Emissions toAir

Environmental Performance

• Electric Power5,250 MWh

• Fuel Oil 2,240 kL• Fuel Gas 2,003 km3

Energy

• SF6 795 kg

GreenhouseGases

• PRTR (Excluding VOC)171 t

• VOC 457 t

Chemical Substances

• City Water 78 kt• Industrial Water

103 kt• Ground Water

1,288 kt

Water

• Emissions 9,719 t

• Recycled 9,395 t

Waste

• Weight of Product41,012 t

• Transportation CO2

1,235 t-CO2

Transportation

Meiden Group

0

2,000

4,000

6,000

8,000

10,000

0

20

40

60

80

100(t) (%)

2004 2005 2006 (year)

Emissions Recycling Rate

Trends in Waste and Recycling Rates

0

10,000

20,000

30,000

40,000

50,000

0

20

40

60

80

100(t) (%)

1990 2004 20062005 (year)

CO2 Emissions Specific Consumption

Trends in CO2, Specific Consumption

0

100

200

300

400

500

0

20

40

60

80

100(t) (%)

1990 2004 20062005 (year)Amount HandledAmount Discharged

Discharge RateCompared with 2000 (%)

Trends in VOC

PRTR: Pollutant Release and Transfer RegisterVOC: Volatile Organic Compounds

Financial Section

Consolidated Financial Review 14

Five-Year Summary 14

Operational Review 15

Consolidated Balance Sheets 16

Consolidated Statements of Income 18

Consolidated Statements of Shareholders’ Equity/Changesin Net Assets 19

Consolidated Statements of Cash Flows 20

Notes to Consolidated Financial Statements 21

Independent Auditors’ Report 35

Consolidated Financial Review 14

Five-Year Summary 14

Operational Review 15

Consolidated Balance Sheets 16

Consolidated Statements of Income 18

Consolidated Statements of Shareholders’ Equity/Changesin Net Assets 19

Consolidated Statements of Cash Flows 20

Notes to Consolidated Financial Statements 21

Independent Auditors’ Report 35


Outline of Profits and LossesDuring this consolidated fiscal year, the Japanese

economy showed further expansion of corporate

profits and improvement in the job situation. Against

this backdrop, capital investment and consumer

spending grew, exports also increased, and the

continuing economic recovery was steady.

On the other hand, the heavy electric industry

experienced further decrease in demand and drop in

prices because of diminishing public investment and

related factors. The industry therefore continues to

face an extremely challenging business climate.

Under these economic circumstances, the

Company and consolidated subsidiaries have made a

sustained sales effort, yielding major increases in the

Industrial Systems Business Sector. The result was that

sales rose 5.7% over the fiscal year to 194,194 million

yen.

We made group-wide-effort to reduce costs and

cut expenses however, influenced by declining prices

and other factors, income before tax and minority

interests declined by 612 million yen over the previous

fiscal year to 4,935 million yen. Net income for the year

declined by 938 million yen to 2,314 million yen.

Financial ConditionsTotal assets at the end of March 2007 amounted to

223,386 million yen, an increase of 22,112 million yen.

As a result of increased receivables and inventories,

current assets stood at 116,229 million yen, an increase

of 6,347 million yen. Property, plant and equipment

amounted to 61,523 million yen, an increase of

15,022 million yen. Total current liabilities amounted

to 112,901 million yen, an increase of 8,143 million yen,

and net assets stood at 64,135 million yen, an increase

of 3,718 million yen, compared to last year’s

shareholders’ equity.

FIVE-YEAR SUMMARYMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31)

Millions of yen2007 2006 2005 2004 2003

Net sales ¥194,194 ¥183,747 ¥185,442 ¥181,560 ¥184,853

Net income (loss) 2,314 3,252 5,113 2,335 924

Net income (loss) per share (yen) 10.18 14.12 22.33 10.14 4.58

Cash dividends paid 1,137 909 682 – –

Depreciation and amortization 4,369 3,872 3,906 4,262 4,921

Total assets 223,386 201,274 180,595 194,163 197,140

Net property, plant and equipment 61,523 46,501 35,838 43,215 40,406

Shareholders’ equity per share (yen) 272.20 265.64 232.19 209.91 182.36

CONSOLIDATED FINANCIAL REVIEW


(Millions of yen)

05

06

91,300

98,044

07 95,395

Social Infrastructure SystemsSocial Infrastructure Systems

Engineering Systems Others

Industrial Systems

49.1%

63,72405

50,50306

60,45607

(Millions of yen)

31.1%

05 15,898

06 20,359

07 22,911

(Millions of yen)

11.8%

(Millions of yen)

14,52005

14,84106

15,43207

8.0%

OPERATIONAL REVIEW

This segment includes business related to the

construction of social infrastructure. We provide

solution services of all kinds in relation to electric

power quality, energy conservation, and related

matters, and we engage in the manufacturing and

marketing of all types of electrical equipment involved

in power generation, transmission, transforming,

distribution, and other related functions, for power

companies, government and other public agencies and

offices, railroads, highways, private facilities, and other

such establishments.

We are also involved in the field of water supply and

sewerage treatment for local governments. Our activities

include manufacturing and marketing products for the

control of treatment equipment and processes of all kinds,

and for the improvement of IT networks. We are further

developing environmental solution services that include

contracting for the maintenance management of water

treatment plants, and so on.

This segment includes business operations related

to product systems used in the manufacturing industry,

IT, and other general industry operations. In addition

to providing private industry with power substations,

motor vehicle testing systems, and logistics support

systems, we engage in the manufacture and marketing

of motors, inverters, and other products for use in

textile machinery, elevators, and other such equipment.

We are active in the information and telecommuni-

cations field, manufacturing and marketing

component products for industrial computer and

networking systems. We also provide IT solutions in

an effort to promote the greater operational

sophistication and efficiency of corporations and local

governments through the use of IT.

This segment provides services relating to the

remote management and monitoring of facilities and

the proposal of measures for extending the life of

facilities, energy conservation, and other such services

related primarily to the maintenance of products we

supply. We also engage in the maintenance of

semiconductor manufacturing equipment and the

reconditioning of used manufacturing equipment.

This segment includes marketing companies not

tied to specific business fields, and companies that

contract accounting, payroll, and other administrative

functions, as well as welfare services for employees.


CONSOLIDATED BALANCE SHEETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (as of March 31, 2007 and 2006)

Millions of yen Thousands of U.S.dollars (Note1)

2007 2006 2007

Assets

Current assets:

Cash and time deposits (Note 17) ¥5,452 ¥9,981 $46,203

Short term securities (Notes 4 and 17) 34 237 288

Receivables:

Trade notes (Note 3) 6 ,515 5,593 55,212

Trade accounts 65,284 58,099 553,254

Loans and advances 2,273 3,586 19,263

Due from unconsolidated subsidiaries and affiliates 1,584 1,976 13,424

Allowance for doubtful accounts (955) (926) (8,093)

Inventories (Note 5) 29,679 23,564 251,517

Deferred income taxes (Note 16) 2,852 3,646 24,169

Other current assets 3,511 4,126 29,755

Total current assets 116,229 109,882 984,992

Property, plant and equipment:

Land (Notes 6 and 9) 7,989 7,837 67,703

Buildings and structures 43,391 43,021 367,720

Machinery and equipment (Note 7) 53,121 55,698 450,178

Construction in progress (Note 9) 23,907 12,509 202,602

Less: Accumulated depreciation (66,885) (72,564) (566,822)

Net property, plant and equipment 61,523 46,501 521,381

Investment and other assets:

Investment securities (Notes 4 and 9) 27,602 26,823 233,915

Investments in unconsolidated subsidiaries and affiliates (Note 4) 9,216 9,436 78,102

Long-term loans 82 98 695

Deferred income taxes (Note 16) 45 40 381

Other assets 8,831 8,607 74,839

Allowance for doubtful accounts (142) (113) (1,203)

Total investment and other assets 45,634 44,891 386,729

Total assets ¥223,386 ¥201,274 $1,893,102

See accompanying notes.


Millions of yen Thousands of U.S.dollars (Note1)

2007 2006 2007

Liabilities, minority interests and shareholders’ equity/Net assetsCurrent liabilities:

Short-term borrowings (Note 8) ¥9,814 ¥15,516 $83,169Commercial paper (Note 8) 20,000 10,000 169,492Current portion of long-term debt (Note 8) 1,519 6,293 12,873Payables:

Trade notes (Note 3) 11,059 10,338 93,720Trade accounts 26,538 23,817 224,898Due to unconsolidated subsidiaries and affiliates 5,921 6,058 50,178

Advances received from customers 9,976 11,556 84,542Accrued income taxes 4,624 364 39,186Accrued bonuses for employees 4,472 4,613 37,898Other current liabilities 18,978 16,203 160,832

Total current liabilities 112,901 104,758 956,788Long-term debt (Notes 8 and 9) 27,827 13,174 235,822Employees’ severance and retirement benefits (Note 10) 15,505 15,058 131,398Reserve for retirement allowance for directors and corporate auditors 426 549 3,610Deferred income taxes (Note 16) 1,721 4,766 14,585Other long-term liabilities 871 604 7,382

Minority interests — 1,948 —Contingent liabilities (Note 12)Shareholders‘ equity (Note 2):

Common stockAuthorized –557,385,000 sharesIssued and outstanding –227,637,704 shares — 17,070 —

Capital surplus — 13,204 —Retained earnings — 19,743 —Net unrealized holding gains on securities — 10,774 —Foreign currency translation adjustment — (342) —Less: Treasury stock, at cost — (32) —

Total shareholders’ equity — 60,417 —Net assets (Notes 2 and 11)

Common stockAuthorized –576,000,000 sharesIssued and outstanding –227,637,704 shares 17,070 — 144,661

Capital surplus 13,204 — 111,898Retained earnings 20,681 — 175,263Less:Treasury stock, at cost (57) — (483)Unrealized gains on securities, net of taxes 11,063 — 93,754Unrealized losses on hedging derivatives, net of taxes (37) — (314)Foreign currency translation adjustment (73) — (618)Minority interests 2,284 — 19,356

Total net assets 64,135 — 543,517Total liabilities, minority interest and shareholders’ equity/net assets ¥223,386 ¥201,274 $1,893,102


CONSOLIDATED STATEMENTS OF INCOMEMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2007, 2006 and 2005)

Millions of yen Thousands of U.S.dollars (Note1)2007 2006 2005 2007

Net sales (Note 15) ¥194,194 ¥183,747 ¥185,442 $1,645,712

Cost of sales (Notes 14 and 15) 152,731 141,776 142,617 1,294,331

Selling, general and administrative expenses (Notes 14 and 15) 35,238 35,473 35,014 298,627

Operating income 6,225 6,498 7,811 52,754

Other income (expenses):

Interest and dividend income 471 382 417 3,992

Interest expense (606) (627) (701) (5,136)

Equity in net income (loss) of affiliated companies 180 (289) (1,626) 1,525

Gains on sales of marketable securities and investment securities 272 579 5 2,305

Loss on devaluation of securities (127) (37) (72) (1,076)

Loss on disposal of inventories (100) (21) (1,556) (847)

Loss on disposal of fixed assets (337) (152) (911) (2,856)

Gain on sales of property,plant and equipment 217 3 12,080 1,839Gains on the release from the substitutional portion of government — — 825 —Welfare Pension Insurance Scheme (Notes 2 and 10)

Development working expenses for the Osaki station west exit (93) (59) (2,289) (788)

Impairment loss of fixed assets (Note 6) — (250) — —

Others (1,167) (1,704) (2,996) (9,890)

Income before income taxes and minority interests 4,935 4,323 10,987 41,822

Income taxes (Note 16):

Current 1,325 329 1,165 11,229

Past 3,655 — — 30,974

Deferred (2,421) 591 4,232 (20,517)

2,559 920 5,397 21,686

Minority interests 62 151 477 526

Net income ¥2,314 ¥3,252 ¥5,113 $19,610

Yen U.S.dollars (Note1)

2007 2006 2005 2007

Amounts per share of common stock (Note 2):

Net income ¥10.18 ¥14.12 ¥22.33 $0.09

Cash dividends applicable to the year 5.00 5.00 4.00 0.04



CONSOLIDATED STATEMENTS OF SHAREHOLDERS’EQUITY/CHANGES IN NET ASSETSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2007, 2006 and 2005)

Millions of yen

Balance at March 31, 2004 246,252,704 ¥17,070 ¥14,362 ¥13,148 ¥433 ¥4,299 ¥(394) ¥(1,149)Net income — — — 5,113 — — — —Cash dividends — — — (682) — — — —Bonuses to directors and corporate auditors — — — (29) — — — —Decrease due to reduction of consolidated subsidiary — — — — (433) (0) — —Adjustments from translation of foreign currency financial statements (Note 2) — — — — — — (15) —Increase in treasury stock — — — — — — — (22)Increase in net unrealized holding gains on securities — — — — — 1,120 — —

Balance at March 31, 2005 246,252,704 17,070 14,362 17,550 — 5,419 (409) (1,171)Net income — — — 3,252 — — — —Cash dividends — — — (909) — — — —Bonuses to directors and corporate auditors — — — (38) — — — —Decrease in retained earnings due to addition of consolidated subsidiaries — — — (112) — — (4) —Adjustments from translation of foreign currency financial statements (Note 2) — — — — — — 97 —Increase in treasury stock — — — — — — — (20)Retirement of treasury stock (18,615,000) — (1,158) — — — — 1,158 Disposal of treasury stock — — 0 — — — — 1Increase in net unrealized holding gains on securities — — — — — 5,355 (26) —

Balance at March 31, 2006 227,637,704 17,070 13,204 19,743 — 10,774 (342) (32)

Number of shares issued

Common stock

Capital surplus

Retained earnings

Treasury stock,at cost

Unrealized gains on

securities, net of taxes

Unrealized losses on hedging

derivatives, net of taxes

Foreign currency

translation adjustment

Minority interests

Total


Common stock

Capital surplus

Retained earnings

Revaluation reserve for land,

net of taxes

Net unrealized holding gains on

securities

Foreign currency translation adjustment

Treasury stock, at cost

Shareholders’ equity at March 31, 2006 as previously reported

Reclassification due to adoption of new accounting standards for presentation of net assets in the balance sheet at April 1, 2006

Net assets at April 1, 2006 Net incomeCash dividendsBonuses to directors and corporate auditorsDecrease in retained earnings due to addition ofconsolidated subsidiariesAcquisition of treasury stockDisposal of treasury stockNet changes during the year

Balance at March 31, 2007

222,637,704

222,637,704

222,637,704

222,637,704

222,637,704

$144,661

144,661

$111,898

111,898

$167,31419,610(9,635)

(390)

(1,636)

175,263

$(271)

(220)8

(483)

$91,305

2,449

93,754

$—

(314)

(314)

$(2,898)

2,280

(618)

$16,508

2,847

19,356

$528,51719,610(9,635)

(390)

(1,636)(220)

87,263

543,517

¥17,070

17,070

17,070

¥13,204

13,204

0

13,204

¥19,743

19,7432,314

(1,137)(46)

(193)

20,681

¥(32)

(32)

(26)1

(57)

¥10,774

10,774

28911,063

¥—

—

(37)(37)

¥(342)

(342)

269(73)

¥—

1,9481,948

3362,284

¥60,417

1,94862,3652,314

(1,137)(46)

(193)(26)

1857

64,135


Common stock

Capital surplus

Retained earnings

Treasury stock,at cost

Unrealized gains on

securities, net of taxes

Unrealized losses on hedging

derivatives, net of taxes

Foreign currency

translation adjustment

Minority interests

Total

Net assets at April 1, 2006 Net incomeCash dividendsBonuses to directors and corporate auditorsDecrease in retained earnings due to addition of consolidated subsidiariesAcquisition of treasury stockDisposal of treasury stockNet changes during the year

Balance at March 31, 2007

Millions of yen

Thousands of U.S.dollars (Note1)


CONSOLIDATED STATEMENTS OF CASH FLOWSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES (years ended March 31, 2007, 2006 and 2005)

Millions of yen

2007 2006 2005 2007

Operating activities:

Income (loss) before income taxes and minority interests ¥4,935 ¥4,323 ¥10,987 41,822Adjustments to reconcile income (loss) before income taxes and minority interests to net cash provided by operating activities:

Depreciation and amortization 4,369 3,872 3,906 37,025Increase (decrease) in allowances (200) 625 1,239 (1,695)Interest and dividend income (471) (382) (417) (3,992)Equity in net loss (income) of affiliated companies (180) 289 1,626 (1,525)Interest expense 606 627 701 5,136Gains on sales of marketable securities and investment securities (272) (579) (5) (2,305)Gains on sales of property, plant and equipment (217) (3) (12,080) (1,839)Loss on disposal of fixed assets 337 152 911 2,856Loss on devaluation of securities 124 37 72 1,051Decrease (increase) in receivables (8,466) 1,277 (138) (71,746)Decrease (increase) in inventories (5,846) (2,017) 3,613 (49,542)Increase (decrease) in payables 6,412 104 (515) 54,339Other-net 3,283 (622) 1,995 27,822

Sub-total 4,414 7,703 11,895 37,407

Interest and dividend received 473 387 424 4,008Interest expense paid (805) (624) (694) (6,822)Income taxes paid (453) (532) 167 (3,839)

Net cash provided by operating activities 3,629 6,934 11,792 30,754

Investing activities:Purchase of marketable securities and investment securities (585) (801) (653) (4,958)Proceeds from sales of marketable securities and investment securities 526 754 966 4,458Purchase of property, plant and equipment (20,312) (13,738) (3,691) (172,136)Proceeds from sales of property, plant and equipment 28 72 13,291 237Proceeds from sales of securities issued by subsidiaries which caused the change of consolidation scope — — (411) —Other-net (1,214) (1,612) (2,270) (10,287)

Net cash provided by (used in) investing activities (21,557) (15,325) 7,232 (182,686)

Financing activities:Decrease in short-term bank loans (5,870) (457) (18,253) (49,746)Increase in commercial paper 10,000 10,000 — 84,746Proceeds from long-term debt 16,170 3,000 9,610 137,034Repayment of long-term debt (6,358) (4,771) (6,819) (53,881)Cash dividends paid (1,126) (899) (673) (9.542)Other-net 186 270 (1,090) 1,575

Net cash provided by (used in) financing activities 13,002 7,143 (17,225) 110,186Effects of exchange rate change on cash and cash equivalents 175 51 (10) 1,483Net Increase (decrease) in cash and cash equivalents (4,751) (1,197) 1,789 (40,263)Cash and cash equivalents at beginning of year 10,081 11,044 9,255 85,433Increase in cash and cash equivalents due to addition of consolidated subsidiaries 156 234 — 1,321Cash and cash equivalents at end of year (Note 17) ¥5,486 ¥10,081 ¥11,044 $46,491


Thousands of U.S.dollars (Note1)


1. Basis of Presenting ConsolidatedFinancial StatementsThe accompanying consolidated financial statements

have been prepared in accordance with the provisions set

forth in the Japanese Securities and Exchange Law and its

related accounting regulations, and in conformity with

accounting principles generally accepted in Japan (“Japanese

GAAP”), which are different in certain respects as to

application and disclosure requirements of International

Financial Reporting Standards.

The accounts of overseas subsidiaries are based on their

accounting records maintained in conformity with generally

accepted accounting principles prevailing in the respective

countries of domicile. The accompanying consolidated

financial statements have been restructured and translated

into English (with some expanded descriptions and the

inclusion of consolidated statements of shareholders’ equity

for 2006) from the consolidated financial statements of the

Company prepared in accordance with Japanese GAAP and

filed with the appropriate Local Finance Bureau of the

Ministry of Finance as required by the Securities and

Exchange Law. Some supplementary information included

in the statutory Japanese language consolidated financial

statements, but not required for fair presentation, is not

presented in the accompanying consolidated financial

statements.

The consolidated balance sheet as of March 31, 2007,

which has been prepared in accordance with the new

accounting standard as discussed in Note 2 (b), is presented

with the consolidated balance sheet as of March 31, 2006,

prepared in accordance with the previous presentation rules.

Also, as discussed in Note 2 (c), the consolidated

statement of changes in net assets for the year ended March

31, 2007, has been prepared in accordance with the new

accounting standard. The accompanying consolidated

statement of shareholders’ equity for the year ended March

31, 2006, was voluntarily prepared for the purpose of

inclusion in the consolidated financial statements, although

such statements were not required to be filed with the Local

Finance Bureau.

The translation of the Japanese yen amounts into U.S.

dollars are included solely for the convenience of readers

outside Japan, using the prevailing exchange rate at March

31, 2007, which was ¥118 to U.S. $1. The convenience

translations should not be construed as representations that

the Japanese yen amounts have been, could have been, or

could in the future be, converted into U.S. dollars at this or

any other rate of exchange.

2. Summary of SignificantAccounting Policies

a) Principles of ConsolidationThe accompanying consolidated financial statements

include the accounts of the Company and its 36 consolidated

subsidiaries in 2007 (32 in 2006 and 29 in 2005). All

significant intercompany accounts and transactions have

been eliminated in consolidation. The Company’s remaining

subsidiaries, whose total assets, sales, net income and retained

earnings are not significant in the aggregate in relation to

the comparable figures in the consolidated financial

statements, have not been consolidated.

In the elimination of investments in subsidiaries, the

assets and liabilities of the subsidiaries, including the portion

attributable to minority shareholders, are evaluated using

the fair value when the Company acquired control of the

respective subsidiaries.

b) Accounting Standard for Presentation ofNet Assets in the Balance SheetEffective from the year ended March 31, 2007, the

Company and its consolidated subsidiaries adopted the new

accounting standard, “Accounting Standard for Presentation

of Net Assets in the Balance Sheet” (Statement No. 5 issued

by the Accounting Standards Board of Japan on December

9, 2005), and the implementation guidance for the

accounting standard for presentation of net assets in the

balance sheet (the Financial Accounting Standard

Implementation Guidance No. 8 issued by the Accounting

Standards Board of Japan on December 9, 2005),

(collectively referred to as “the New Accounting Standards”).

The consolidated balance sheet as of March 31, 2007

prepared in accordance with the New Accounting Standards,

is comprised of three sections covering assets, liabilities and

net assets sections. The consolidated balance sheet as of

March 31, 2006, prepared pursuant to the previous

presentation rules is comprised of four sections covering

assets, liabilities, minority interests and shareholders’ equity.

Under the New Accounting Standards, the following

items are presented differently at March 31, 2007 compared

to March 31, 2006. The net assets section includes unrealized

gains/losses on hedging derivatives, net of taxes. Under the

NOTES TO CONSOLIDATED FINANCIAL STATEMENTSMEIDENSHA CORPORATION AND CONSOLIDATED SUBSIDIARIES


previous presentation rules, unrealized gains/losses on

hedging derivatives were included in the assets or liabilities

section without considering the related income tax effects.

Minority interest is included in the net assets section at

March 31, 2007. Under the previous presentation rules,

companies were required to present minority interests

between the non-current liabilities and shareholders’ equity

sections.

The adoption of the New Accounting Standards had

no impact on the consolidated statement of income for the

year ended March 31, 2007. Also, if the New Accounting

Standards had not been adopted at March 31, 2007, the

shareholders’ equity amounting to 61,888 million ($524,475)

thousand would have been presented.

c) Accounting Standard for Statement ofChanges in Net AssetsEffective from the year ended March 31, 2007, the

Company and its consolidated subsidiaries adopted the new

accounting standard, “Accounting Standard for Statement

of Changes in Net Assets” (Statement No. 6 issued by the

Accounting Standards Board of Japan on December 27,

2005), and the implementation guidance for the accounting

standard for statement of changes in net assets (the Financial

Accounting Standard Implementation Guidance No. 9 issued

by the Accounting Standards Board of Japan on December

27, 2005), (collectively referred to as “the Additional New

Accounting Standards”).

The Company prepared the accompanying

consolidated statement of changes in net assets for the year

ended March 31, 2007, in accordance with the Additional

New Accounting Standards. The accompanying consolidated

statement of shareholders’ equity for the year ended March

31, 2006, which was voluntarily prepared for inclusion in

the consolidated financial statements, has not been adapted

to the new presentation rules of 2007.

d) Equity MethodInvestments in affiliated companies (all 20% to 50%

owned and certain others 15% to 20% owned) are accounted

for by the equity method in the years ended March 31, 2007,

2006 and 2005.

Investments in five affiliated companies are accounted

for by the equity method in 2007, 2006 and 2005. Investments

in all unconsolidated subsidiaries and other affiliated

companies, that would not have material effect on the

consolidated financial statements, are stated at cost.

e) SecuritiesSecurities are classified based on the intent of holding

as (a) securities held for trading purposes (hereafter, “trading

securities”), (b) debt securities intended to be held to

maturity (hereafter, “held-to-maturity debt securities”), (c)

equity securities issued by non-consolidated subsidiaries and

affiliated companies, or (d) all other securities that are not

classified in any of the above categories (hereafter, “available-

for-sale securities”).

The Company and its consolidated subsidiaries do not

have trading securities and held-to-maturity debt securities.

Equity securities issued by subsidiaries and affiliated

companies which are not consolidated or accounted for using

the equity method are stated at the moving-average cost.

Available-for-sale securities with no available fair marker

values are stated at the moving-average cost.

If the market value of equity securities issued by

unconsolidated subsidiaries and affiliated companies and

available-for-sale securities declines significantly, such

securities are stated at fair market value and the difference

between fair market value and the carrying amount is

recognized as loss in the period of the decline unless the

declines are considered temporary. If the fair market value

of equity securities issued by unconsolidated subsidiaries

and affiliated companies not accounted for on the equity

method is not readily available, such securities should be

written down to net asset value with a corresponding charge

in the statement of income in the event net asset value

declines significantly unless the decline is considered as

recoverable.

Available-for-sale securities with available fair market

values are stated at fair market value. Unrealized gains and

unrealized losses on these securities are reported, net of

applicable income taxes, as a separate component of net

assets. Realized gains and losses on sale of such securities

are computed using the moving-average cost.

f) Derivatives and Hedge Accounting

Derivative financial instruments are stated at fair value,

and the Company and its consolidated subsidiaries recognize

changes in the fair value as gains or losses unless derivative

financial instruments are used for hedging purposes.

If derivative financial instruments are used as hedges

and meet certain hedging criteria, the Company and its

consolidated subsidiaries defer recognition of gains or losses

resulting from changes in fair value of derivative financial

instruments until the corresponding losses or gains on the

hedged items are recognized.

However, in cases where forward foreign exchange

contracts are used as hedges and meet certain hedging

criteria, forward foreign exchange contracts and hedged

items are accounted for in the following manner:


1. If a forward foreign exchange contract is executed to

hedge an existing foreign currency receivable or

payable,

(a) the difference, if any, between the Japanese yen amount

of the hedged foreign currency receivable or payable

translated using the spot rate at the inception date of

the contract and the book value of the receivable or

payable is recognized in the statement of income in

the period which includes the inception date, and

(b) the discount or premium on the contract (that is, the

difference between the Japanese yen amount of the

contract translated using the contracted forward rate

and that translated using the spot rate at the inception

date of the contract) is recognized over the term of

the contract.

2. If a forward foreign exchange contract is executed to

hedge a future transaction denominated in a foreign

currency, the future transaction will be recorded using

the contracted forward rate, and no gains or losses on

the forward foreign exchange contract are recognized.

Also, if interest rate swap contracts are used as hedge

and meet certain hedging criteria, the net amount to be paid

or received under the interest rate swap contract is added to

or deducted from the interest on the assets or liabilities for

which the swap contract is executed.

g) Inventories

Inventories are stated at cost, which is mainly

determined by the average method as to raw materials and

supplies and the specific identification method as to finished

products, semi-finished products and work in process.

h ) Property, Plant and Equipment andDepreciation

Depreciation is mainly computed using the declining-

balance method over estimated useful lives except for

buildings acquired after March 31, 1998, which are

depreciated based on the straight-line method over estimated

useful lives.

i) Impairment of Fixed Assets

Effective April 1 2005, the Company and its

consolidated subsidiaries adopted the new accounting

standard for impairment of fixed assets (“Opinion

Concerning Establishment of Accounting Standard for

Impairment of Fixed Assets,” issued by the Business

Accounting Deliberation Council on August 9, 2002) and

“Implementation Guidance for the Accounting Standard for

Impairment of Fixed Assets” (the Financial Accounting

Standard Implementation Guidance No. 6, issued by the

Accounting Standards Board of Japan on October 31, 2003).

As a result of adopting the new accounting standard,

income before income taxes and minority interests decreased

by ¥250 million for the year ended March 31, 2006.

Additionally, impairment losses comprising the

cumulative total have been deducted directly from the book

value of respective assets in accordance with revised

regulations.

j) Allowance for Doubtful Accounts

The Company and its consolidated subsidiaries

provide the allowance for doubtful accounts in an amount

sufficient to cover possible losses on collection by estimating

individually uncollectible amounts and applying a

percentage based on collection experience to the remaining

accounts.

k) Employees’ Severance and RetirementBenefits


provide two types of severance and retirement benefit plans,

unfunded lump-sum payment plans and funded non-

contributory pension plans, under which all eligible

employees are entitled to benefits based on the level of wages

and salaries at the time of retirement or termination, length

of service and certain other factors.

The liabilities and expenses for severance and

retirement benefits are determined based on the amounts

actuarially calculated using certain assumptions.


provided allowance for employees’ severance and retirement

benefits based on the estimated amounts of projected benefit

obligation and the fair value of the plan assets at the balance

sheet date.

Prior service costs are recognized in expenses in equal

amounts over the average of the estimated remaining service

lives of the employees, and actuarial gains and losses are

recognized in income or expenses using the straight-line

method over the average of the estimated remaining service

lives commencing with the following period.

Employees of Japanese companies are compulsorily

included in the Welfare Pension Insurance Scheme operated

by the government. Employers are legally required to deduct

employees’ welfare pension insurance contributions from

their payroll and to pay them to the government together

with employers’ own contributions. For companies that have

established their own Employees’ Pension Fund which meets

certain legal requirements, it is possible to transfer a part of

their welfare pension insurance contributions (referred to

as the “substitutional portion” of the government’s Welfare


Pension Insurance Scheme) to their own Employees’ Pension

Fund under the government’s permission and supervision.

Based on the newly enacted Defined Benefit Corporate

Pension Law, the Company and some domestic consolidated

subsidiaries decided to restructure their Employees’ Pension

Fund and were permitted by the Minister of Health, Labor

and Welfare on October 29, 2003 to be released from their

future obligation for payments for the substitutional portion

of the Welfare Pension Insurance Scheme. Pension assets for

the substitutional portion maintained by the Employees’

Pension Fund are to be transferred back to the government’s

scheme.

The Company and some domestic consolidated

subsidiaries applied the transitional provisions as prescribed

in paragraph 47-2 of the JICPA Accounting Committee

Report No. 13, “Practical Guideline for Accounting of

Retirement Benefits (Interim Report)”, and the effect of

transferring the substitutional portion was recognized on

the date permission was received from the Ministry of

Health, Labor and Welfare. As a result, in the year ended

March 31, 2004, the Company and some consolidated

domestic subsidiaries recorded gains on the release from the

substitutional portion of the government’s Welfare Pension

Insurance Scheme amounting to ¥225 million, which was

calculated based on the amount of the substitutional portion

of the projected benefit obligations as of the permission date,

the related pension assets determined pursuant to the

government formula, and the related unrecognized items.

On October 1, 2004, the Company and some domestic

consolidated subsidiaries received approval from the

Minister of Health, Labor and Welfare with respect to transfer

of the substitutional portion of the benefit obligation and

related pension plan assets funded in previous years, and on

March 16, 2005, transferred the related portion of the liability

reserves to the Japanese government. As a result, the

Company and some domestic consolidated subsidiaries

recognized a gain of ¥825 million for the year ended March

31, 2005 as the difference between the estimated amount of

the transfer and the actual balance transferred.

l) Income Tax


recognize tax effects of temporary differences between the

carrying amounts of assets and liabilities for tax and financial

reporting. The provision for income taxes is computed based

on the pretax income included in the consolidated statement

of income. The asset and liability approach is used to

recognize expected future tax consequences of temporary

differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts

used for income tax purposes.

The Company and some subsidiaries adopted

consolidated tax return system.

m) Interest Cost on Borrowing Included inAcquisition Cost of Fixed Assets

The company capitalizes interest cost on borrowing

before the operation of the fixed asset as part of the cost of

construction in progress on the Osaki Station West Exit Area

Project. The capitalized interest cost recorded as a part of

construction in progress for the year ended March 31, 2007,

amounted to 242 million yen.

n) Amounts Per Share of Common Stock

The computation of net income per share is based on

the weighted average number of shares of common stock

outstanding during the year.

For the years ended March 31, 2007, 2006 and 2005,

diluted net income per share was not shown since the

Company had no securities with dilutive effect.

Cash dividends per share presented in the consolidated

statements of income represent actual amounts applicable

to the respective years.

o) Statements of Cash Flows

In preparing the consolidated statements of cash flows,

cash on hand, readily-available deposits and short-term

highly liquid investments with maturities that do not exceed

three months at the time of purchase, are considered to be

cash and cash equivalents.

p) Translation of Foreign Currency Accountsand Financial Statements

Receivables and payables denominated in foreign

currencies are translated into Japanese yen at the year-end

rates.

Financial statements of consolidated overseas

subsidiaries are translated into Japanese yen at the year-end

rate, except that net asset accounts are translated at historical

rates and statement of income items resulting from

transactions with the Company at the rates used by the

Company.

Foreign currency translation adjustments resulting

from translation of foreign currency financial statements

were presented separately in the foreign currency translation

adjustment and minority interests in the consolidated

balance sheets.


4. SecuritiesA. The following table summarizes acquisition costs and book values of securities with fair value as of March 31, 2007 and 2006.

Millions of yen2007 Acquisition cost Book value Difference

Securities with book value (fair value) exceeding acquisition cost:Equity securities ¥8,193 ¥26,519 ¥18,325

¥8,193 ¥26,519 ¥18,325Securities with book value (fair value) not exceeding acquisition cost:

Equity securities ¥306 ¥272 ¥(35)Others 74 55 (18)

¥380 ¥327 ¥(53)

Millions of yen2006 Acquisition cost Book value Difference

Securities with book value (fair value) exceeding acquisition cost:Equity securities ¥8,254 ¥26,124 ¥17,870

¥8,254 ¥26,124 ¥17,870Securities with book value (fair value) not exceeding acquisition cost:

Equity securities ¥15 ¥14 ¥(1)Bonds 76 75 (1)

¥91 ¥89 ¥(2)

Thousands of U.S. dollars2007 Acquisition cost Book value Difference

Securities with book value (fair value) exceeding acquisition cost:Equity securities $69,432 $224,737 $155,297

$69,432 $224,737 $155,297Securities with book value (fair value) not exceeding acquisition cost:

Equity securities $2,593 $2,305 $(297)Others 627 466 (152)

$3,220 $2,771 $(449)

B. The following table summarizes book values of securities with no fair value as of March 31, 2007 and 2006.

(a) Available-for-sale securities;

Book valueMillions of yen Thousands of U.S. dollars

2007 2006 2007

Non-listed foreign bonds ¥34 ¥237 $288Non-listed equity securities 757 610 6,415Others — — —Total ¥791 ¥847 $6,703

3. Trade Notes Receivable and Payable Matured on March 31, Which Is a BankHolidayThe year-end date of March 31, 2007, was a bank holiday. The amount of unsettled trade notes receivable and payable

that matured on March 31, 2007, in the financial statement are as follows;

Millions of yen Thousands of U.S. dollars2007 2006 2007

Trade notes receivable ¥461 ¥— $3,907Trade notes payable 39 — 331


D. Total sales amounts of available-for-sale securities sold, gains and losses, in the years ended March 31, 2007, 2006 and

2005 are follows:


Sales amount ¥311 ¥754 ¥534 $2,636Gains 272 579 9 2,305Losses — — 0 —

C. Maturities of available-for-sale securities with maturities as of March 31, 2007 and 2006.

Millions of yen

Bonds ¥237 — — —

Year ended March 31, 2006 Within 1 year

Over 1 year but within 5 years

Over 5 years butwithin 10 years Over 10 years

Millions of yen

Others ¥34 — — —




Thousands of U.S. dollars

Others $288 — — —




(b) Equity securities issued by subsidiaries and affiliated companies;

Book valueMillions of yen Thousands of U.S. dollars

2007 2006 2007

Investments in unconsolidated subsidiaries ¥344 ¥751 $2,915Investments in affiliated companies 8,872 8,685 75,187Total ¥9,216 ¥9,436 $78,102

5. InventoriesInventories as of March 31, 2007 and 2006 were as follows.


Finished products ¥2,897 ¥1,918 $24,551

Semi-finished products 3,682 3,095 31,203

Work-in-process 21,156 17,248 179,288

Materials and supplies 1,944 1,303 16,475

Total ¥29,679 ¥23,564 $251,517

Location Use Type Millions of yen

Numazu city, Shizuoka Prefecture Business asset Land ¥250

6. Impairment of Fixed AssetsAs discussed in Note 2 i, the Company and its consolidated subsidiaries adopted the accounting standard for impairment

of fixed assets. Impairment loss of fixed assets for the year ended March 31, 2006 consisted of the following.

27Annual Report 2007 27Annual Report 2007

The Company and its consolidated subsidiaries have grouped their fixed assets principally based on their divisions or

business units. Certain consolidated subsidiaries reduced the book value of above assets to the recoverable amounts because

their market value had come down in price and their profitability had worsened.

Recoverable amounts are stated in net realizable values based on assessments by third-party licensed appraisers.

7. Subsidies received from the Japanese GovernmentThe Company received a portion of the acquisition costs of certain tangible fixed assets from the Japanese Government.

The aggregated amount of the subsidies deducted from the acquisition costs of the tangible fixed assets as of March 31,

2007, was ¥1,235 million ($10,446 thousand).


0.4% to 6.0% loans from banks and insurance companies ¥29,346 ¥19,467 $248,695

Less: Current portion (1,519) (6,293) (12,873)

Total ¥27,827 ¥13,174 $235,822

Commercial paper, bearing interest rates of 0.6% ¥20,000 ¥10,000 $169,492

8. Short-Term Borrowings, Long-Term Debt and Commercial PaperShort-term borrowings are bank loans and represented by notes. The weighted average interest rate was 1.6% as of

March 31, 2007 and 0.8% as of March 31, 2006, respectively.

Long-term debt and commercial paper as of March 31, 2007 and 2006 consisted of the following.

Year ended March 31 Millions of yen Thousands of U.S. dollars

2008 ¥1,519 $12,873

2009 2,453 20,788

2010 6,284 53,254

2011 4,463 37,822

2012 2,940 24,915

2013 and thereafter 11,687 99,043

The annual maturities of long-term debts as of March 31, 2007 were as follows.

Commitment Line Agreement

The Company renewed an agreement with a syndicate of 16 Japanese banks to set up a commitment line by multiple

finance institutions for Meidensha Corporation in Japan.

The unexecuted balance of lending commitments at the company as of March 31, 2007 and 2006 were as follows:


Total lending commitments: ¥30,000 ¥25,000 $254,237

Less amounts currently executed: 8,100 11,250 68,644

Unexecuted balance ¥21,900 ¥13,750 $185,593


10. Employees’ Severance and Pension BenefitsThe Company and its consolidated subsidiaries adopted the accounting standard for employees’ severance and

retirement benefits, under which the liabilities and expenses for severance and retirement benefits are determined based on

the amounts obtained by actuarial calculations.

The liabilities for severance and retirement benefits included in the liability section of the consolidated balance sheets

as of March 31, 2007 and 2006 consist of the following:

1. On October 1, 2004, the Company and some domestic consolidated subsidiaries received approval from the Minister

of Health, Labor and Welfare with respect to transfer of the substitutional portion of the benefit obligation and

related pension plan assets funded in previous years, and on March 16, 2005, transferred the related portion of the

liability reserves to the Japanese government. As a result, the Company and some domestic consolidated subsidiaries

recognized a gain of ¥825 million for the year ended March 31, 2005 as the difference between the estimated

amount of the transfer and the actual balance transferred.


Projected benefit obligation ¥51,681 ¥50,311 $437,974Unrecognized prior service costs 2,074 3,743 17,576Unrecognized actuarial differences (1,896) (2,831) (16,068)Less fair value of pension assets (22,779) (20,892) (193,042)Less unrecognized net transition obligation (13,575) (15,273) (115,042)Liability for severance and retirement benefits ¥15,505 ¥15,058 (131,398 )

Obligation with collateral pledged as of March 31, 2007 and 2006 was as follows.


Long-term debt ¥14,000 ¥8,400 $118,644

9. Pledged AssetsThe following assets were pledged as collateral as of March 31, 2007 and 2006.


Land ¥1,479 ¥1,479 $12,534

Investment securities 32 31 271

Construction in progress 19,029 8,121 161,263

Total ¥20,540 ¥9,631 $174,068

Investment securities of ¥2 million ($17 thousand) were pledged as collateral for borrowing from financial institutions

by an affiliate.

An affiliate engaged in the wind farm business has a project finance loan that is secured by pledged business assets

amounting to ¥2,280 million ($19,322 thousand).

Total business assets of this affiliate are amounting to ¥3,390 million ($28,729 thousand).


The discount rate and the rate of expected return on plan assets used by the Company and its consolidated subsidiaries

are 2.7% and 3.0% for 2007, 2.7% and 2.0% for 2006 and 2005, respectively.

The estimated amount of all retirement benefits to be paid at the future retirement date is allocated equally to each

service year using the estimated number of total service years. Prior service costs are recognized as an expense in equal

amounts over 10 years, and actuarial gains/losses are recognized in the statement of income using the straight-line method

over 12 to 15 years for 2007, 2006 and 2005, respectively.

11. Net AssetsAs described in Note 2 (b), net assets comprise four subsections, which are the owners’ equity, accumulated gains

(losses) from valuation and translation adjustments, and minority interests.

The Japanese Corporate Law (“the Law”) became effective on May 1, 2006, replacing the Japanese Commercial Code

(“the Code”). The Law is generally applicable to events and transactions occurring after April 30, 2006 and for fiscal years

ending after that date.

Under Japanese laws and regulations, the entire amount paid for new shares is required to be designated as common

stock. However, a company may, by a resolution of the Board of Directors, designate an amount not exceeding one-half of

the price of the new shares as additional paid-in capital, which is included in capital surplus.

Under the Law, in cases where a dividend distribution of surplus is made, the smaller of an amount equal to 10% of

the dividend or the excess, if any, of 25% of common stock over the total of additional paid-in-capital and legal earnings

reserve must be set aside as additional paid-in-capital or legal earnings reserve. Legal earnings reserve is included in retained

earnings in the accompanying consolidated balance sheets.

Under the Code, companies were required to set aside an amount equal to at least 10% of the aggregate amount of

cash dividends and other cash appropriations as legal earnings reserve until the total of legal earnings reserve and additional

paid-in capital equaled 25% of common stock.

Under the Code, legal earnings reserve and additional paid-in capital could be used to eliminate or reduce a deficit by

a resolution of the shareholders’ meeting or could be capitalized by a resolution of the Board of Directors. Under the Law,

both of these appropriations generally require a resolution of the shareholders’ meeting.


Service costs - benefits earned during the year ¥2,080 ¥2,266 ¥2,422 $17,627Interest cost on projected benefit obligation 1,226 1,174 1,187 10,390Expected return on plan assets (495) (239) (181) (4,195)Amortization of prior service costs (405) (460) (354) (3,432)Amortization of net transition obligation 1,698 1,698 1,698 14,390Amortization of actuarial differences 290 395 373 2,457Employee’s contribution — — — —Severance and retirement benefit expenses ¥4,394 ¥4,834 ¥5,145 $37,237

2. The Company introduced a new performance-based retirement benefit plan, and revised its retirement allowance

rules on October 1, 2005.

As a result of this revision, the projected benefit obligation decreased by ¥2,114 million and prior service costs have

occurred in the same amount.

3. The prior service costs have been incurred due to the change in the MEIDENSHA employee’s pension fund

agreement in the year ended March 31, 2004.

Included in the consolidated statements of income for the years ended March 31, 2007, 2006 and 2005 are severance

and retirement benefit expenses comprising the following:



Assumed acquisition cost

Machinery and equipment ¥161 ¥186 $1,364

Others 945 1,242 8,009

Accumulated depreciation (772) (953) (6,542)

¥334 ¥475 $2,831

13. Lease Information:(1) Finance leases, which do not transfer ownership of properties to lessees, are not capitalized and are accounted

for in the same manner as operating leases. Certain related information are summarized as follows:

(i) Assumed amounts (inclusive of interest) of acquisition cost, accumulated depreciation and net book value

as of March 31, 2007 and 2006, are summarized as follows.


Repurchase of trade notes receivables discounted and endorsed ¥767 ¥376 $6,500

Guarantees of loans from banks to employees and unconsolidatedsubsidiaries and affiliates 363 551 3,076

Additional paid-in capital and legal earnings reserve may not be distributed as dividends. Under the Code, however,

on condition that the total amount of legal earnings reserve and additional paid-in capital remained equal to or exceeded

25% of common stock, they were available for distribution by resolution of the shareholder’s meeting. Under the Law, all

additional paid-in-capital and all legal earnings reserve may be transferred to other capital surplus and retained earnings,

respectively, which are potentially available for dividends.

The maximum amount that the Company can distribute as dividends is calculated based on the non-consolidated

financial statements of the Company in accordance with Japanese laws and regulations.

At the annual shareholders’ meeting held on June 28, 2007, the shareholders approved cash dividends amounting to

1,136 million ($9,627 thousand). Such appropriations have not been accrued in the consolidated financial statements as of

March 31, 2007. Such appropriations are recognized in the period in which they are approved by the shareholders.

12. Contingent LiabilitiesContingent liabilities as of March 31, 2007 and 2006, were as follows.

(ii) Future minimum lease payments, inclusive of interest, as of March 31, 2007 totaled ¥334 million

($2,831 thousand), including ¥159 million ($1.347 thousand) due within one year.

(iii) Lease payments, which are equal to assumed depreciation charges for the years ended March 31, 2007,

2006 and 2005, were ¥192 million ($1,627 thousand), ¥294 million and ¥523 million, respectively.

(iv) Assumed depreciation charges are computed using the straight-line method over lease terms assuming no

residual value.

(2) Lease contracts receivable under non-cancelable operating leases as lessor as of March 31, 2007 totaled ¥119 million

($1,008 thousand), including ¥68 million ($576 thousand) due within one year.


Millions of yen

Year ended March 31, 2007

Net sales:

Outside customers ¥95,395 ¥60,456 ¥22,911 ¥15,432 ¥194,194 ¥— ¥194,194

Inter-segment 5,126 6,497 394 9,372 21,389 (21,389) —

Total 100,521 66,953 23,305 24,804 215,583 (21,389) 194,194

Operating expenses 97,414 65,543 21,510 24,044 208,511 (20,542) 187,969

Operating income (loss) ¥3,107 ¥1,410 ¥1,795 ¥760 ¥7,072 ¥(847) ¥6,225

Identifiable assets ¥75,996 ¥51,107 ¥18,288 ¥31,928 ¥177,319 ¥46,067 ¥223,386

Depreciation and amortization 1,683 754 317 142 2,896 1,473 4,369

Capital expenditures 2,795 812 294 13,669 17,570 3,944 21,514

Social Infrastructure Systems

Industrial Systems

Engineering Others Total Eliminations or Corporate

Consolidated

Millions of yen


Net sales:


Inter-segment 4,804 7,942 251 8,979 21,976 (21,976) —

Total 102,848 58,445 20,610 23,820 205,723 (21,976) 183,747


Operating income (loss) ¥4,239 ¥802 ¥1,528 ¥354 ¥6,923 ¥(425) ¥6,498


Depreciation and amortization 1,439 803 332 173 2,747 1,125 3,872

Capital expenditures 5,404 518 305 298 6,525 10,554 17,079


Industrial Systems


Consolidated

14. Research and Development ExpensesResearch and development expenses are charged to income as incurred. The amounts charged to income for the years

ended March 31, 2007, 2006 and 2005 were ¥6,041 million ($51,195 thousand), ¥5,494 million, and ¥6,186 million, respectively.

15. Segment InformationIndustry segments:

The Company and its consolidated subsidiaries operate principally in four industrial sectors: Social Infrastructure

Systems, Industrial Systems, Engineering and Other sectors.

The business organization was changed in years ended March 31, 2005 to bring it in line with changes in the business

environment, and the method of identifying business segments was changed as follows in order to reflect actual business

practices in more appropriate segments:

• The former Energy and Environment segments were combined into Social Infrastructure Systems.

• The former Info and Communications and Industrial Systems were combined into Industrial Systems.

• Engineering, formerly included under Others, has been separated for segment disclosure.

Information by industry segments for the years ended March 31, 2007, 2006 and 2005 are as follows:


Geographic area:

Information by geographic area is not disclosed due to the Company and its consolidated subsidiaries substantially in

Japan, which represents more than 90% of consolidated net sales and identifiable assets, respectively.

Overseas sales:

Overseas sales information for the year ended March 31, 2007 is as follows: the information for 2006 is not disclosed

due to overseas sales being less than 10% of consolidated net sales.

Millions of yen


Net sales:


Inter-segment 5,662 7,388 294 8,523 21,867 (21,867) —

Total 96,962 71,112 16,192 23,043 207,309 (21,867) 185,442


Operating income (loss) ¥4,315 ¥2,515 ¥973 ¥902 ¥8,705 ¥(894) ¥7,811


Depreciation and amortization 1,528 980 342 172 3,022 884 3,906

Capital expenditures 1,101 1,351 315 107 2,874 3,488 6,362


Industrial Systems


Consolidated



Net sales:

Outside customers $808,432 $512,339 $194,161 $130,780 $1,645,712 $— $1,645,712

Inter-segment 43,441 55,059 3,339 79,424 181,263 (181,263) —

Total 851,873 567,398 197,500 210,204 1,826 ,975 (181,263) 1,645,712

Operating expenses 825,542 555,449 182,288 203,764 1,767,043 (174,085) 1,592,958

Operating income (loss) $26,331 $11,949 $15,212 $6,440 $59,932 $(7,178) $52,754

Identifiable assets $644,034 $433,110 $154,983 $270,576 $1,502,703 $390,398 $1,893,102

Depreciation and amortization 14,263 6,390 2,686 1,203 24,542 12,483 37,025

Capital expenditures 23,686 6,881 2,492 115,839 148,898 33,424 182,322


Industrial Systems


Consolidated

Year ended March 31, 2007Millions of yen

Overseas sales ¥21,146 ¥3,628 ¥24,774

Consolidated net sales — — ¥194,194

Percentage of consolidated net sales 10.9 1.9 12.8

Asia Other Areas Total


Significant components of deferred tax assets and liabilities of the Company and its consolidated subsidiaries as of

March 31, 2007 and 2006 are as follows.

2007 2006 2005

Statutory tax rate 39.69% 39.69% 39.69%

Permanent difference (Social expenses, etc.) 5.99 (3.68) (7.68)

Per capital inhabitant tax 2.39 2.67 1.01

Net changes in valuation allowance 1.52 (18.46) 7.86

Equity in loss (income) of affiliated companies (1.44) 2.65 6.31

Tax deduction (7.41) — —

Additional taxes 7.58 — —

Statutory tax rates variance of overseas subsidiaries 1.93 — —

Other-net 1.61 (1.60) 1.93

Effective tax rate 51.86% 21.27% 49.12%


Deferred tax assets:

Net operating loss carry forwards ¥150 ¥438 $1,271

Allowance for retirement benefits 5,654 5,471 47,915

Bonuses 1,783 1,829 15,110

Other 3,012 3,730 25,526

Gross deferred tax assets 10,599 11,468 89,822

Less: Valuation allowance (1,033) (1,107) (8,754)

9,566 10,361 81,068

Deferred tax liabilities:

Deferred gain on sales of property for tax purpose — 3,215 —

Unrealized holding gains on securities 7,261 7,094 61,534

Deferred gain from division of corporation 1,131 1,131 9,585

Other — 1 —

Gross deferred tax liabilities 8,392 11,441 71,119

Net deferred tax assets ¥1,174 ¥(1,080) $9,949

Year ended March 31, 2007Thousands of U.S. dollars

Overseas sales $179,203 $30,746 $209,949

Consolidated net sales — — $1,645,712

Percentage of consolidated net sales 10.9 1.9 12.8

Asia Other Areas Total

16. Income TaxesThe Company and its consolidated subsidiaries are subject to a number of taxes based on income, which in aggregate,

resulted in normal statutory tax rates of approximately 39.69% for the years ended March 31, 2007, 2006 and 2005, respectively.

The following table summarizes the significant differences between the statutory tax rate and the Company’s effective

tax rate for financial statement purposes for the years ended March 31, 2007, 2006 and 2005.


17. Cash and Cash EquivalentsReconciliations of cash and time deposits shown in the consolidated balance sheets and cash and cash equivalents

shown in the consolidated statements of cash flows as of March 31, 2007 and 2006 are as follows:

18. Related Party TransactionsSignificant transactions with related parties for the years ended March 31, 2007, 2006 and 2005 are as follows:


Cash and time deposits ¥5,452 ¥9,981 $46,203

Short-term securities 34 100 288

Cash and cash equivalents ¥5,486 ¥10,081 $46,491


Millions of yen

Japan AE Power Systems Corporation ¥7,044 ¥— ¥2,525 ¥—

Japan Motor & Generator Co., Ltd. 6,372 — 2,320 —


Millions of yen

Japan AE Power Systems Corporation ¥6,713 ¥— ¥2,287 ¥—



Millions of yen

Japan AE Power Systems Corporation ¥6,836 ¥458 ¥3,299 ¥62

Japan Motor & Generator Co., Ltd. 6,833 6,134 2,211 2,079



Japan AE Power Systems Corporation $59,695 $— $21,398 $—


Purchase of finished products

Material supply, etc. Accounts payable Secured income receivable








Independent Auditors’ Report

To the Board of Directors of MEIDENSHA CORPORATION:

We have audited the accompanying consolidated balance sheets of MEIDENSHA CORPORATION and consolidated

subsidiaries as of March 31, 2007 and 2006, the related consolidated statements of income for the three years in the period

ended March 31, 2007, the consolidated statement of changes in net assets for the year ended March 31, 2007, the consolidated

statement of shareholders’ equity for the years ended March 31, 2006, and the consolidated statements of cash flows for the

three years in the period ended March 31, 2007 and 2006 expressed in Japanese yen. These consolidated financial statements

are the responsibility of the Company’s management. Our responsibility is to independently express an opinion on these

consolidated financial statements based on our audits.

We conducted our audits in accordance with auditing standards generally accepted in Japan. Those standards require

that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of

material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in

the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by

management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable

basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the

consolidated financial position of MEIDENSHA CORPORATION and subsidiaries as of March 31, 2007 and 2006, and the

consolidated results of their operations and their cash flows for each of the three years in the period ended March 31, 2007,

in conformity with accounting principles generally accepted in Japan.

Without qualifying our opinion, we draw attention to the following.

As discussed in Note 2 to the consolidated financial statements, effective April 1, 2005, MEIDENSHA CORPORATION

and its consolidated subsidiaries adopted the new accounting standard for impairment of fixed assets.

The U.S. dollar amounts in the accompanying consolidated financial statements with respect to the year ended March

31, 2007 are presented solely for convenience. Our audit also included the translation of yen amounts into U.S. dollar

amounts and, in our opinion, such translation has been made on the basis described in Note 1 to the consolidated financial

statements.

Tokyo, Japan

June 28, 2007


OVERSEAS AFFILIATES (AS OF JULY, 2007)OVERSEAS AFFILIATES (AS OF JULY, 2007)

CHINA

• DONGGUAN MEIDENELECTRICAL ENGINEERINGCO., LTD.Yan Wu Industrial District,Wan Jiang Country, Dongguan,Guangdong P.C. 523049 P.R.ChinaPhone: 86-769-22285210Facsimile: 86-769-22285250

• SHANGHAI MEIDENSEMICONDUCTOR CO., LTD.53-1A, No.311, Fu Te Nan Lu,Wai Gao Qiao Free Trade Zone,Shanghai P.C. 200137, P.R.ChinaPhone: 86-21-50483681Facsimile: 86-21-50483035

• MEIDEN HANGZHOUDRIVE SYSTEMS CO., LTD.No.168, Hongxing Road, QiaonanDistrict, Xiaoshan Economic &Technological Development Zone,Hangzhou, Zhejiang, P.C. 311231P.R.ChainaPhone: 86-571-8369-6808Facsimile: 86-571-8369-6818

INDONESIA

• P.T. MEIDEN ENGINEERINGINDONESIA20th Floor, Summitmas I,Jl. Jenderal Sudirman Kaveling61-62, P.O.BOX 6920/KBY/Summitmas IJakarta Selatan 12190, IndonesiaPhone: 62-21-520-0612Facsimile: 62-21-520-0240

KOREA

• MEIDEN KOREA CO., LTD.Royal Building No.410,5 Dangju-Dong, Chongro-ku,Seoul, KoreaPhone: 82-2-736-0232~3Facsimile: 82-2-736-0234

MALAYSIA

• MEIDEN ELECTRICENGINEERING SDN. BHD.G. 03, Ground Floor,Wisma Academy, 4A, Jalan 19/1,46300 Petaling Jaya,Selangor Darul Ehsan, MalaysiaPhone: 60-3-79554646Facsimile: 60-3-79546466

• MEIDEN ZHENGZHOUELECTRIC CO., LTD.No.87 Hehuan Street,Zhengzhou Hi-Tech IndustriesDevelopment Zone,Zhengzhou, Henan ProvinceP.C. 450001, P.R.ChinaPhone: 86-371-67848800Facsimile: 86-371-67848797

• MEIDEN SHANGHAI CO., LTD.15D, Hengji Plaza, No.99Huaihai-Donglu, Huangpu-Qu,Shanghai, P.C. 200021, P.R.ChinaPhone: 86-21-63860358Facsimile: 86-21-63860058

HONG KONG

• MEIDEN PACIFIC (CHINA) LTD.Unit 01-02A, 16/F, Tower 1, Ever GainPlaza, 88 Container Port Road,Kwai Chung, N.T., Hong KongPhone: 852-2503-2468Facsimile: 852-2887-8046


• MEIDEN ELECTRIC (THAILAND) LTD.898 Moo 2, Bangpa-in IndustrialEstate, Udomsorayuth Rd., Klongjig,Bangpa-in, Ayudhaya 13160,ThailandPhone: 66-35-258258Facsimile: 66-35-221388

UNITED ARAB EMIRATES

• MEIDENSHA CORPORATIONRoom 905, AI Reem TowerAI Maktoum Street, Deira,P.O.Box 117841, Dubai,United Alab EmiratesPhone: 971-4-229-9653Facsimile: 971-4-229-9654

THE UNITED KINGDOM

• MEIDEN EUROPE LTD.NYK Complex Bradbourne Drive,Tilbrook, Milton Keynes MK7 8BN,England, U.K.Phone: 44-1908-276000Facsimile: 44-1908-276010

SINGAPORE

• MEIDEN ASIA PTE. LTD.5, Jalan Pesawat, Jurong IndustrialEstate, Singapore 619363Phone: 65-6268-8222Facsimile: 65-6264-4292

• MEIDEN SINGAPORE PTE. LTD.5, Jalan Pesawat, Jurong IndustrialEstate, Singapore 619363Phone: 65-6268-8222Facsimile: 65-6264-4292

• MEIDEN POWER SOLUTIONS(SINGAPORE) PTE. LTD.14 Penjuru CloseSingapore 608610Phone: 65-6377-5387Facsimile: 65-6377-5386

THAILAND

• THAI MEIDENSHA CO., LTD.15th Floor, Rasa Tower II,555 Phaholyothin Road, Chatuchak,Chatuchak, Bangkok10900,ThailandPhone: 66-2792-4200Facsimile: 66-2792-4299

THE UNITED STATES

• MEIDEN AMERICA, INC.15800 Centennial Drive, NorthvilleTownship, MI 48168, U.S.A.Phone: 1-734-656-1400Facsimile: 1-734-459-1863

• MEIDEN TECHNICAL CENTERNORTH AMERICA LLC15810 Cetennial Drire, NorthvilleTownship, MI 48168, U.S.A.Phone: 1-734-656-1400Facsimile: 1-734-459-1863


CONSOLIDATED SUBSIDIARY COMPANIESMEIDEN SHOJI Co., Ltd.

Capital ¥300 millionSales of electric products and componentsMitomi New Building, 20-18,Ebisu 1-chome, Shibuya-ku,Tokyo 150-0013 JapanPhone: 3-5449-3700 Fax: 3-5449-3701

Kofu Meidensha Electric Mfg. Co., Ltd.Capital ¥400 million

Manufacture and sales of electric motors825 Nakadate, Chuo-shi,Yamanashi 490-3801 JapanPhone: 55-274-7910 Fax: 55-274-7946

Meiden Plant Engineering &Construction Co., Ltd.

Capital ¥130 millionConstructing serviceMeiko Building, 5-5, Osaki 5-chome,Shinagawa-ku, Tokyo 141-8616 JapanPhone: 3-5487-6437 Fax: 3-5487-6487

MEIDEN CHEMICAL CO., LTD.Capital ¥95 million

Insulating varnish and molded instrumenttransformer515, Kaminakamizo, Higashimakado-aza,Numazu-shi, Shizuoka 410-0865 JapanPhone: 55-923-0238 Fax: 55-923-0886

Meiden Kohsan Co., Ltd.Capital ¥100 million

Sales of products and materials, and agentservice of insuranceMeiko Building, 5-5, Osaki 5-chome,Shingawa-ku, Tokyo 141-8616 JapanPhone: 3-3490-3737 Fax: 3-3490-3906

MEIDEN SOFTWARE CORPORATIONCapital ¥60 million

Engineering and programming of software809, Oka-Isshikitorimachi, Numazu-shi,Shizuoka 410-0012 JapanPhone: 55-923-4966 Fax: 55-923-1191

MEIDEN FOUNDRY INDUSTRIAL Co., Ltd.Capital ¥50 million

Casting4, Nyogetsu, Heisaka-cho, Nishio-shi,Aichi 444-0305 JapanPhone: 563-59-6181 Fax: 563-59-4132

MEIDEN SYSTEM ENGINEERING Co., Ltd.Capital ¥50 million

System engineering of plantsMeiko Building, 5-5, Osaki 5-chome,Shingawa-ku, Tokyo 141-8616 JapanPhone: 3-5487-6514 Fax: 3-5487-6516

Meiden Kankyo Service Co., Ltd.Capital ¥30 million

Maintenance and control service of watertreatment equipmentMeiko Building, 5-5, Osaki 5-chome,Shinagawa-ku, Tokyo 141-8616 JapanPhone: 3-3490-0630 Fax: 3-3490-0623

HOKUTO DENKO CORPORATIONCapital ¥25 million

Manufacture and sales of electric sensors22-13, Himonya 4-chome, Meguro-ku,Tokyo 152-0003 JapanPhone: 3-3716-3686 Fax: 3-3793-8787

MEIDEN SYSCON Co., Ltd.Capital ¥20 million

Manufacture and sales of switchgear andrelays726-1, Osuwa, Numazu-shi,Shizuoka 410-0873 JapanPhone: 55-924-4630 Fax: 55-922-4013

Meiden Kiden Kogyo Co., Ltd.Capital ¥20 million

Machining and repairing service127, Nishishinmachi,Oota-shi, Gunma 373-0847 JapanPhone: 276-20-6371 Fax: 276-32-7999

MEIDEN MEDIAFRONT CORPORATIONCapital ¥40 million

Printing and copy serviceMaruki Building, 13-7, Nishigotanda1-chome, Shinagawa-ku,Tokyo 141-0031 JapanPhone: 3-3490-4821 Fax: 3-3490-4910

Meiden Sheet Metal ProductsCorporation

Capital ¥90 millionManufacture and sales of sheet metal515, Kaminakamizo, Higashimakado-aza,Numazu-shi, Shizuoka 410-0865 JapanPhone: 55-929-5555 Fax: 55-929-5566

MEIDEN HOIST SYSTEM COMPANY, LTD.Capital ¥400 million

Manufacture and sales of hoists496-1, Ittangosewari, Nishibiwajima-cho,Kiyosu-shi, Aichi 452-8602 JapanPhone: 52-501-3211 Fax: 52-501-3277

MSA Co., Ltd.Capital ¥400 million

Manufacture and sales of surge arresters515, Kaminakamizo, Higashimakado-aza,Numazu-shi, Shizuoka 410-0865 JapanPhone: 55-929-4300 Fax: 55-929-4399

❖ MEIDEN SINGAPORE PTE. LTD.Capital S$25.4 million

Manufacture and sales of transformers,switchgears and circuit-breakers and relatedengineering and constructing service

❖ THAI MEIDENSHA CO., LTD.Capital TB20 million

Engineering and constructing service

❖ MEIDEN ELECTRIC (THAILAND) LTD.Capital TB70 million

Manufacture and sales of switchgears

❖ P.T.MEIDEN ENGINEERINGINDONESIA

Capital US$320 thousandEngineering and constructing service

❖ MEIDEN EUROPE LTD.Capital £750 thousand

Sales of electric products and components

❖ MEIDEN PACIFIC (CHINA) LTD.Capital HK$10 million

Sales of electric products andcomponents, and constructing service

❖ MEIDEN AMERICA, Inc.Capital US$6.3 million

Sales of dynamometer products andengineering and consulting services

❖ SHANGHAI MEIDENSEMICONDUCTOR Co., Ltd.

Capital ¥280 millionRemanufacturing and engineering servicesof semiconductor manufacturing devices

❖ MEIDEN HANGZHOU DRIVESYSTEMS Co., Ltd.

Capital US$5.7 millionManufacture and sales of electrical morors

❖ DONGGUAN MEIDEN ELECTRICALENGINEERING CO., LTD.

Capital HK$8.4 millionManufacture and sales of switchgears andslaes of electric products and components

❖ MEIDEN ZHENGZHOU ELECTRICCO., LTD.,

Capital CNY20 millionManufacture and sales of surge arresters

❖ MEIDEN SHANGHAI CO., LTD.Capital ¥50 million

Sales of electric products and components

❖ MEIDEN TECHNICAL CENTERNORTH AMERICA LLC

Capital US$6 millionTesting service of engine and drive train

Plus 7 domestic subsidiaries.❖ Please see page 36-37 to find contact information for

overseas affiliates.


PRESIDENT

Keiji Kataoka

CORPORATE DATACORPORATE NAMEMEIDENSHA CORPORATION(Kabushiki Kaisha Meidensha)

HEAD OFFICERiverside Building, 36-2, Nihonbashi Hakozakicho,Chuo-ku, Tokyo 103-8515 Japan

(From September 18)ThinkPark Tower, 2-1-1, Osaki, Shinagawa-ku,Tokyo 141-6029 Japan

FOUNDED1897

EXECUTIVE VICE PRESIDENT

Masaaki Kato

EXECUTIVE VICE PRESIDENT

Kennosuke Goto

BOARD OF DIRECTORS(AS OF JUNE 28, 2007)

DIRECTOR ANDSENIOR MANAGINGEXECUTIVE OFFICER

Kosuke Sato

Hiroshi Sugiyama

Ken Torikai

Noriyasu Nagai

Junzo Inamura

DIRECTORS

Tetsuro Kawakami

Yasuo Matoi

SENIOR CORPORATEAUDITORS

Tadashi Sanada

Kazuo Hosoya

CORPORATE AUDITORS

Masayuki Tsubonoya

Nobuyuki Watanabe

COMMON STOCKAuthorized 576,000,000 sharesIssued 227,637,704 shares¥17,070 million($161,038 thousand)

SHAREHOLDERS19,259

TRANSFER AGENTThe Sumitomo Trust & Banking Co., Ltd.

annual report 2007 · 3. we will promote corporate social responsibility (csr). we will cultivate...

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